June 2021 Exiger's Anti-Bribery and Corruption Roundtable Key Takeaways
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
June 2021 Exiger’s Anti-Bribery and Corruption Roundtable Key Takeaways
ABOUT EXIGER Exiger is the global authority on financial crime and risk compliance introducing technology-enabled solutions to the market’s biggest compliance challenges. Exiger is changing the way banks, corporations and governmental agencies fight financial crime by combining industry expertise and artificial intelligence to root out bribery, corruption, sanctions violations, money laundering and terrorist financing. In recognition of the growing volume and complexity of data and regulations, Exiger is committed to working with clients to create a more sustainable compliance environment through its holistic and innovative approach to problem solving. Powering its Advisory, Diligence and Government Services solutions, Exiger has developed purpose-built technology—DDIQ and Insight 3PM— trained and deployed by its subject matter experts to accelerate the auditability, efficiency, quality and cost effectiveness of clients’ compliance operations. Exiger operates in seven countries and eleven cities around the world, including London, New York City, the Washington, D.C. metro area, San Antonio, Toronto, Bucharest, Hong Kong, Singapore and Sydney.
“If you think compliance is expensive – try non-compliance”
Paul McNulty, Former U.S. Deputy Attorney General
Exiger recently hosted its first virtual Anti-Bribery and Corruption (ABC)
Roundtable under Chatham House Rules bringing together senior-level ABC
Practitioners from a range of global banks to discuss the current risks and
challenges faced by their ABC teams. Key discussion topics included an overview
of recent regulatory and industry developments, emerging trends across the globe
and the current challenges in implementing an effective ABC programme.
Exiger provided an overview of regulatory developments in the ABC space across
the globe and highlighted the increased focus in the following areas:
Foreign bribery / extra territorial reach
International collaboration / Information sharing
Third party and supply chain risk (incl. ESG/Modern Slavery, Cyber)
Corporate transparency (incl. beneficial ownership)
Adequate procedures, books & records provisions
Whistleblowing
Magnitsky type sanctions
Despite the pandemic, regulators and law enforcement authorities have been
actively updating their guidance providing additional clarity around their
expectations. Some noteworthy updates in the past year included:
§ The U.S Department of Justice (DOJ) and the Securities and Exchange
Commission (SEC) released the second edition of its Foreign Corrupt
Practices Act (FCPA) resource guide and the Biden administration
announced a comprehensive national security strategy to combat corruption.
§ U.K introduced the Global Anti-Corruption Sanctions Regulations and
continued its pursuits around Unexplained Wealth Orders (UWOs), corporate
transparency and register reforms.
§ Germany introduced the Corporate Sanctions Act with plans to roll out its
Supply Chain Act in 2023.
§ China introduced additional cross border data restrictions further increasing
the complexity for multi-jurisdictional organisations operating in China.
3Key Takeaways
Regulatory Focus
Although 2020 saw a slowdown in
enforcement, mainly due to the pandemic, it
was also the largest year ever for FCPA
settlements driven by an increase in number of
record-breaking financial penalties. 2020 also
saw the highest number of whistle-blower tips
since the start of the program in 2011.
As regulatory and enforcement bodies continue
to remain focussed on increasing their
resources, staffing and budgets, it logically
indicates that more enforcement can be
expected as the countries ease out of the pandemic. 1
Whilst the US Government collected a record-breaking US$2.94 billion in fines, penalties,
disgorgement and interest, an additional US$6.31 billion was collected by non-US
authorities. Combined this made the worldwide total arising from coordinated FCPA
resolutions of approx. USD$9.1 billion.
64% of the participants concurred that there
Have you noticed an increase in
regulatory focus on ABC in 2020/2021?has been an increase in regulatory focus on
ABC in recent years, with several firms having
Yes 64%
experienced more ABC-focussed regulatory
visits, reviews or enforcement action.
No 36% Although there is a sense that ABC is
potentially secondary to other Financial Crime
Compliance (FCC) topics, the rising trend in
Deferred Prosecution Agreements (DPAs) and the magnitude of recent enforcement
actions may change this order of prioritisation.
The main area of focus for regulators was most What topics do you think regulators are
often perceived by firms to be third-party risk most concerned with?
management (73%), closely followed by Senior Management Engagement 64%
ownership of ABC risks by the first line of
defence (1LOD) (64%) and engagement from Risk Ownership/First Line of
senior management and 1LOD (64%). This is a Defence Engagement 64%
shift in a historical focus away from Gifts and
Entertainment as ABC programmes have Risk Assessment and Reporting
matured over time with policies now in place (incl. KPIs/KRIs/metrics/MI) 55%
to prevent lavish and excessive gifts and
entertainment. Third Party Risk Management
(incl. Beneficial Ownership 73%
55% of the participants also noted that risk transparency)
assessments and reporting (including Anything of Value (incl. Hiring Practices
management information, key risk indicators Donations, Gifts & Entertainment) 9%
and key performance indicators) continue to
be an area of interest primarily driven by the Adequate Procedures
and Books & Records 36%
ongoing focus on supervision and senior
management accountability.
Firms and to an extent regulators drive using the rear view mirror – solving problems of the
past. Attention is therefore shifting towards ABC especially for firms who have fixed or are
fixing their AML issues.
1 FCPA Blog - https://fcpablog.com/2020/10/19/with-jf-2020-becomes-the-biggest-year-in-fcpa-history/
4Third Party Risk Management
A key misconception of third party risk is an assumption that it relates only to ABC risk
instead of the wider range of risks associated with supply chain risk. The roundtable
agreed that whilst the 1LOD appreciates and understands that increased exposure from
third party and supply chain risk, more education around oversight of invoice payments
and monitoring third parties is still required given third parties by nature transfer their
risks and liability to the firm. Moreover, as the 1LOD is not accustomed to dealing with
third parties directly, there is a need for a cultural shift in mindset as well.
Additionally, industry guidance around the extent of due diligence and screening
required on third parties and supply chains recommends taking a risk-based approach.
The roundtable discussion highlighted that firms have implemented this approach
inconsistently in that there are a limited number of firms performing due diligence on
Ultimate Beneficial Owners (UBOs) of their third parties similarly to UBOs of their
customers, despite the differing levels of likelihood and impact of ABC risks
materialising. That said, given the increased availability of quality UBO data today,
regulators may well start to push for this enhanced level of third party due diligence for
high-risk third parties. The roundtable discussed how a key control to reduce the impact
of ABC risks transferred from third parties is to incorporate adequate ABC clauses in
contractual agreements in addition to risk assessing the third party itself. It is yet to be
seen if the practices of some firms, driven by their risk profiles, appetite or regulatory
commitments, will impact regulatory expectations placed on the industry as a whole.
Given the common challenges around resourcing faced by all firms, it is crucial to take
a risk-based approach and ensure that the proportionality of resources diverted to
screening third parties and UBOs on an ongoing basis for adverse media, sanctions and
Politically Exposed Persons (PEPs) is aligned to the firm’s risk profile. It is equally
important to clearly document the firm’s risk-based approach in order to demonstrate
that it is applied consistently.
Risk Assessments and reporting
80% of the participants stated that their firms had
Do you have a risk appetite
both an ABC Risk Appetite Statement (RAS) and statement and associated metrics to
related management information (MI) in place. As monitor ABC risk?
regulators are generally interested in assessing
whether MI is sufficiently granular and specific to Yes - Both 80%
each business unit, meaningful MI is a key
mechanism to demonstrate senior management’s
No 20%
awareness of their key risks at a business unit,
functional or geographical location level.
The level of granularity provides confidence that
key risk metrics are not diluted or aggregated
It is critical to have a
across multiple business units with varying levels
meaningful Risk Appetite
of risk exposure.
Framework including a RAS.
Firms should also consider reputational risk in Regulators are now becoming
addition to their ABC risks. Regardless of whether increasingly conscious of
there is a legal risk, the reputational risk may be alignment between MI and a
the trigger to push 1LOD to realise that further firm’s risk appetite.
investment is required to proactively manage ABC
risks proactively. The roundtable discussed how it was important for the intent of an
ABC programme to be geared towards avoiding allegations rather than avoidance of
fines.
5Co-relation between Senior management support and Resourcing
Unsurprisingly, 82% of the participants
highlighted that having sufficient resources What are the real challenges to
implementing an effective ABC
was their biggest challenge when programme?
implementing the ABC programme which
Technical Expertise 9%
leads to a knock-on impact on other aspects
of programme implementation such as
Sufficient Resources (people,
stakeholder buy-in and investment in cost, data) 82%
technology.
Some firms have started to tackle this Lack of Technology 55%
problem through consolidation of resources
across teams such as Fraud and Conduct Senior Management Engagement/
given the similarities in expertise required Support 11%
and transferring additional responsibilities
to the 1LOD (i.e., the true risk owners) whilst 1LOD Buy-In/Business Engagement 55%
also building capability in these teams.
In reality, the key controls relating to an Insufficient Stakeholder
effective ABC programme are dispersed Understanding of Risk 64%
amongst various Second Line of Defence
(2LOD), 1LOD and corporate functions.
These include procurement, finance or accounts payable teams, human resources,
marketing, legal and technology teams. Hence, maintaining adequate levels of
governance and oversight across all the distributed ABC related controls is fundamental
to implementation of an effective ABC programme.
Functions
Do you expectthat have
to see sufficient
an increase senior management support usually correlates with
in resource
application (People/Investment/Technology etc)
those that have sufficient resources. However, whilst 82% of participants felt that
within your organisation in relation to ABC risks?
resourcing was their biggest challenge, only 9% felt that senior management
support was lacking.
Do you expect to see an increase in
Despite the resourcing challenges and
resource application (People/Investment/ lengthy budget approval processes, 40% of
Technology, etc) within your organizations the participants expect an increase in their
in relation to ABC risks? ABC related resources. Although a key driver
for this increase may be attributed to
Yes 64% ongoing regulatory engagement or
remediation commitments, it is still a move
No 36% in the right direction.
In summary, Exiger’s inaugural ABC
Roundtable gave participants an
opportunity to open discussions around some key areas that are being considered in
the establishment of an effective ABC programme. All participants concluded that there
remain many more topics to investigate such as use of technology, the integration of a
data driven approach to third party risk management, the trend towards Environmental,
Social, and Governance (ESG) and the culture of compliance – topics that will be
explored at Exiger’s future Roundtable events.
If you would like more information on any aspect of these discussions or you are
interested in attending the next ABC Roundtable, please contact us.
6For more information, contact:
Samar Pratt
Managing Director
EMEA Regional Lead
spratt@exiger.com
Tara Loftus
Managing Director
Chief of Staff and Americas Office Head, Advisory Solutions
tloftus@exiger.com
New York City | McLean | Silver Spring (DC Metro) | San Antonio | Toronto
Vancouver | London | Bucharest | Hong Kong | Singapore | Sydney
www.exiger.comYou can also read
